Editor’s note: This article is part of a series on Hawaii’s runaway school bus costs. Read other articles in the series.

The Board of Education is expected to decide in coming months if a special review of the Charter Commission's performance is warranted.

The Board of Education is expected to decide in coming months if a special review of the Charter Commission’s performance is warranted.

Civil Beat

Hawaii Department of Education officials say they knew as soon as they opened school bus service bids in 2008 that something was wrong. The private companies that take kids to and from school every day were raising their rates — significantly. And none of them were bidding against each other anymore.

Yet even after four years of no competitive bids for school bus contracts and soaring prices, the department and Board of Education have done little to put the brakes on runaway school bus costs.

In fact, rather than crack down on contractors to hold down costs, district officials and the board shifted the burden to parents, kids and classrooms. They took money from other programs to pay school bus operators, increased the distance from school that a bus rider had to live, and raised the per-day rates that parents had to pay, a Civil Beat review of five years of Board of Education minutes found.

At least three former board members — John Penebacker, Breene Harimoto and former chairman Garrett Toguchi — repeatedly questioned department officials about what was going on with transportation costs, the minutes reflect. But they were told the bus companies could not be forced to compete against each other.

“Every year we were increasing the budget for transportation, to the point that we were taking money from other sources because we didn’t have enough money to cover it,” said Breene Harimoto, a Board of Education member from 2002 to 2010. “I wanted the bus companies to provide justification for why their costs were increasing. Other board members felt there was no option, so we just paid what they asked.”

Toguchi said he and other board members did not realize how much the lack of competition was costing the district until they ran out of money to patch budget holes.

“The Department of Education just came to us every year and said ‘We’re going to use this military impact aid and (Department of Defense) funds to take care of the bus cost shortage,'” Toguchi said. “That had a ‘sweeping it under the rug’ type of effect. Until we didn’t have surplus money anymore, we never realized what the transportation budget had grown to.”

He added that board members started getting worried about bus costs only when they began having to pit programs and services against one another for funding.

“At about the same time, I think everybody became aware of the situation, but the suggestions about how to handle it varied,” he said.

Penebacker did not return calls for this story.

Analysis of School District Records Points to Problem

Civil Beat analyzed 11 years of school bus contract data and documented that the prices being charged by bus contractors skyrocketed when competition abruptly fell off.

“We’ve been aware for a very long time — since the first time we opened those bids in 2008,” said Randy Moore, the department’s assistant superintendent of school facilities and support services. He has been designated the department’s spokesman on this issue. Superintendent Kathryn Matayoshi did not respond to requests for an interview made through her communications director.

That was the first year in decades of school bus services that not a single one of Hawaii’s public school bus contracts received a competitive bid. But even as early as 2005, school bus costs began rising so fast that the department struggled to pay for its transportation program. In the last six years, Hawaii’s school bus prices have more than doubled.

Over that same period, student transportation costs have almost tripled as a percentage of the state’s total education budget: from 1.5 percent in 2006 to 3.2 percent in 2009, to 4.2 percent this year.

In Hawaii, the state is not required to provide transportation to and from school but does so because it’s important that kids get to class. It’s especially critical in a state where many of the schools are in rural communities on sparsely populated islands where it’s sometimes a hardship for working parents to take their kids to school.

But the state doesn’t have to be held hostage by the bus companies. State law allows the department to negotiate or reject bids it considers unreasonable. While the department has tossed back bids for special education transportation, it hasn’t rejected or negotiated a bid for a regular school bus contract since 2005.

Moore said negotiating every contract would be time-consuming, and rejecting them would be unpopular with parents — not to mention school bus companies.

“You can reject a bid,” he said. “But then what do you do when school opens and there’s no bus there to pick up the students?”

Moore said he has tried, through reports to the Board of Education, to shed light on the issue of rising school bus costs and the absence of contractor competition.

In September 2008, he presented board members with a report that summarized the doubled school bus costs. But the report did not explain the significance of the situation — that this was the first year in which bus companies did not compete for contracts.

Earlier this year, Moore shared a different report on school bus contracts with the newly appointed Board of Education. This one was more detailed, pointing out that bus companies tend to terminate their contracts after six years and rebid for them, instead of opting for extensions that include adjustments for inflation. Moore’s report stopped short, though, of singling out any companies taking advantage of the rebid process, or highlighting routes that had seen significant price increases in recent years.

Officials Sidestepped the Issue

Instead of reining in the runaway costs, the district has plugged budget holes through other means. It has redirected money from other areas, including classrooms.

Between 2006 and 2010, the department funneled more than $37 million in military impact aid and other federal grants to transportation. Meanwhile, it took at least $15 million out of three other school-related funds. All while struggling with hundreds of millions in cuts to its overall budget.

The repeated shortfall got so serious that in 2009, the Board of Education also asked the Hawaii Legislature for $12 million in emergency funds.

“They’ve always run short, and often borrowed from Peter to pay Paul within the (Department of Education),” said Marcus Oshiro, chairman of the state House Finance Committee.

When it wasn’t plundering other funds, the department raised bus fares for students and increased the distance between home and school required for students to qualify for the bus. It even tried to change the size of the contracts — how many routes were in them — in hopes of provoking more competition among bus companies.

Below is a summary of the major steps taken to close the transportation deficit over the years.

Year Action
2005 Emergency request of $6 million from Legislature for transportation
2008 $15 million in military impact aid used to offset transportation shortfall
2009 $13 million transferred from student support services budget to transportation program
2009 Increased distance between home and school required to ride the bus
2009 $9 million in impact aid and Department of Defense discretionary funds transferred to offset transportation shortfall
2010 School bus fare increased from 35 cents to 75 cents one way
2010 $1.7 million transferred from school-based budgeting program to transportation
2010 $500,000 transferred from school community services to transportation
2011 School bus fare increased from 75 cents to $1.25 one way

 

Civil Beat called several current and former Board of Education members to discuss the issue of rising transportation costs, but most did not return the calls.

Former board chairman Toguchi said he spoke at length with Moore and others about the school bus costs, and tried to come up with creative solutions such as gaining an exemption from procurement law so the Board of Education could negotiate all of its bus contracts without having to go through a bid process first.

Legislature Finally Steps Up

The district’s request to increase its school bus budget by $19 million this year caught the attention of the Hawaii Legislature. For years, lawmakers have been aware of ballooning bus contract prices. And they also knew that a $1 billion budget deficit would force cuts to all agencies, including education. So the education department’s request for a steep increase shocked them.

Senate Education Chair Jill Tokuda and other lawmakers are reluctant to criticize the department, but they concede the steps taken by the department and board have not been enough. Unless school bus contractors and the district provide some solutions to cut back costs, legislators plan to zero out the department’s transportation budget next year.

The Legislature also required the department to provide lawmakers with a report 40 days before the next legislative session that includes:

(1) A comprehensive analysis of alternatives for providing student transportation, including mandated student transportation services, including but not limited to the elimination of transportation services not mandated by law, route consolidation and reduction scenarios, methods of reducing contracted costs, implementation of transportation services with state personnel and/or buses, partnerships with county agencies, and the use of tripper service as defined in
 
(2) A cost benefit analysis of each alternative identified;
 
(3) A prioritized listing of student transportation routes, the reason the route is a priority, the projected number of students serviced, and the projected cost of providing transportation service for the route;
 
(4) An examination of fee schedules and evaluation of various pricing strategies;
 
(5) An evaluation of how student transportation is successfully administered and costs are managed and paid for in at least four other jurisdictions;
 
(6) Recommendations on the options identified in the report; and
 
(7) Identification of the actual costs for all student transportation services, including mandated, for the prior two fiscal years and projected costs for the current fiscal year by means of financing, contract, and route and identification of those costs;

Source: Hawaii Legislature 2011, HB 200.

In a private meeting among lawmakers and contractors earlier this year, bus companies were asked to compile their own suggestions for lowering prices and submit them to the Department of Education.

“Every one of us is coming up with ideas of how to cut costs down,” said Akita Enterprises CEO Lindy Akita, whose company provides school bus service on Kauai and the Big Island. “Everyone has their own ideas based on financial capability and what profit margin they’re making. But you’re not going to be in business to lose money.”

In October, Moore began scheduling meetings with each of the contractors to go over their individual recommendations. Many of the ideas submitted so far are good, he said.

They range from running older buses and staggering school hours significantly, to parking school buses on campus during the day to save on gas costs driving back to the base yard.

The amount the district could save on any one of the suggestions would depend on the characteristics of the contracts involved, Moore said.

The department, meanwhile, is coming up with some proposals of its own.

Some of the department’s options include:

  • Further reducing bus service on Oahu, where students have access to public transportation.
  • Increasing the distance from school required to qualify for bus service.
  • Setting a price for school bus service, and letting companies bid against each other to provide the best service for that price. Right now, the department issues information about the available contracts and lets companies offer their own price to service the routes.
  • Beginning to charge fares for students on free and reduced-meal plans. That’s more than half the ridership, and they currently ride for free.
  • Buying its own buses and running the service itself.

Each option would bring its own set of challenges, Moore said, some of them logistical as well as political.

Running the school bus service internally, for example, would require purchasing hard-to-find land for a base yard, buying school buses, purchasing the right insurance and recruiting and retaining hundreds of qualified drivers.

The department already took over six school bus routes on the Big Island, after a company was unable to hire enough drivers to meet its contractual obligations. Officials couldn’t say exactly how much it is costing the department to run those buses in comparison with what it would cost to pay a contractor. But transportation manager James Kauhi said it is costing the department more to run the buses itself.

Ultimately, the suggestions from the district and the bus companies are going to have to appease the Legislature.

Toguchi is skeptical of whether the legislative report is going to change anything. The Department of Education needs to think more outside of the box, he said.

“I think the department has a lack of creativity, combined with a lack of resources,” he said.

“Somebody, whether it’s the Department of Education or an external task force, needs to look into the whole situation,” Toguchi said. “Are bus companies colluding to keep bus costs high? They’re not willing to share their books with the state. Is it a matter of the procurement process that’s keeping them from reducing costs?”

Tokuda isn’t sure those are the kinds of answers she will get when the district brings back its transportation report in December, but she is optimistic about hearing solutions that will curb costs.

“I definitely think the (Department of Education) has gotten the message pretty clearly that this is not going to be business as usual,” said Sen. Jill Tokuda. “This is a good thing to do, even in the best of fiscal times. We really need to make sure we rein all of our costs in, and this is something that’s gone on for quite some time.”

Honolulu Reporter-Host Michael Levine provided data analysis for this report.

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